Business at work
The business that I have chosen to study as part of this assignment is Sainsbury’s. Sainsbury’s is a Plc (public limited company) in which is very successful and internationally known. I have chosen to study this particular business as I have an interest in Sainsbury’s and also that I shop their regularly and this will enable me to access information much more efficiently and effectively then any other business I would study. Another thing is that I know former employees that had worked at Sainsbury’s and this again may help me to obtain any information I may need in this assignment.
The Plc that I am currently studying about (Sainsbury’s) has a more complex form of ownership owned by shareholders. A public limited company allows anyone from around the world purchase shares from the stock market for the company that they wish to purchase shares from. As the customer doing this is allows them to have a small part of the business and in return the customer will receive a small dividend from the profit to them for how many shares that the customer will have purchased from Sainsbury’s. There are also benefits and constraints to being a shareholder.
Some of the benefits of being a shareholder are that first of all there may be an increase in the share price which would be very beneficial as the shareholder will gain more capital. Another advantage of being a shareholder is that dividends are received to them by Sainsbury’s. The dividend that is given to the customer by Sainsbury’s is basically the shareholders share of the profits that Sainsbury would make and will be paid to the shareholder at six-monthly intervals (an interim dividend) or at the end of the year (a year-end dividend).
As being a shareholder you will be a part owner of Sainsbury’s business concerns and will be able to attend and vote at shareholders meetings. Also as a customer may have purchased shares in Sainsbury’s they may get reduced costs on Sainsbury’s products, travel discounts and other things inside of the business. Shareholders also have limited liability which is a good thing. This basically means that the amount of money that the customer has put in to buy these shares only looses all the money that he or she has put in and therefore his or her wealth is not at risk.
Some of the constraints of being a shareholder are that the share holder may loose all his money that he may invested in Sainsbury’s as the stock market goes up and down. Many of the share prices will go up if a new successful company is introduced nearby increasing in competition and this will increase the price of shares as they will go very expensive as many people may want to purchase them. Sainsbury’s would have many boards of directors who are business experts who are shareholders of the company.
These people basically make all of the decisions that go on within the organisation and basically are in charge of everything that goes on within this organisation. The board of directors at Sainsbury’s will not always stay the same this may be because they are not doing there job properly and would therefore there will be a annual general meeting in which new board of directors would be selected and may discuss any other problems that the staff or shareholders may have. Sainsbury’s Plc has limited liability.
As I have explained earlier in this task limited liability is at advantage to shareholders as they are only loosing money that they put in to Sainsbury’s. Sainsbury’s will have many competitors wherever they are located. There local competitors are supermarkets located nearby and newsagents, green grocery shops and also butchers and Sainsbury’s international competitors are other supermarkets such as Tesco and Asda who are very successful at the moment. These supermarkets will all be competing for the amount the customers that they attract to the business.
This would be a crucial thing to do because having more loyal customers would mean more money coming into the business. Some way in which Sainsbury’s would have to attract customers are by firstly the price of a product. If the price product is too high then the customer will go look elsewhere for the product where it may be cheaper that’s why it is important for Sainsbury’s to keep ahead of the competition between other supermarkets by keeping the products as cheap as possible.
Another important factor that Sainsbury’s will be competing on is the quality of the product. This is important because customers would want to get the best quality of a product for as cheap as possible and would want there customers to come to this organisation rather then going to anther place were Sainsbury’s would loose this customer. Sainsbury’s will also have to provide a good caring customer service for the customers so that they would feel free to ask about any queries they have about anything and would feel comfortable with talking to the staff at Sainsbury’s.
For Sainsbury’s to set up there Plc they would have to do a range of things for example getting capital to get them started, places they would want to be located and recruiting staff. For Sainsbury’s to be starting a Plc is a good thing as they would be a able to become larger than a private limited organisations as Sainsbury’s would be able to raise a lot of capital through the stock exchange where shares are bought and sold whereas private business organisations would have to go to certain individuals to sell there shares and not anyone form around the world would be able to purchase these shares from that company.
The formation of a public limited company and a private limited company are very similar to each other. As Sainsbury’s would be doing this they would be at an advantage as it would be fairly easy for them to raise capital. There are only two people needed to form a public limited company in this case Sainsbury’s and there is no legal limit on the number of shareholders there ca be. Some of the other advantages that Sainsbury’s would have of being a Plc is that the business would be operating on a large scale, it would be fairly easy for Sainsbury’s to raise finance from banks and also that they would employing specialists to work for them.
Some of the disadvantages of Sainsbury’s being a Plc are that forming this type of organisation can be very expensive and can have a lot of affairs to do with the public also that some of the decisions that are made may be very slow and can cause problems such as disputes occurring inside of the organisation from this the problems may become too big and get out of hand. Sainsbury’s employees and shareholders may be distant from one another which are not a good thing as they would need to interact with each other to become a successful business.
Legal status is an important thing that Sainsbury’s would have to acquire some sort of legal documents this is because they would need to have registered them selves as a company or Plc and would need acquire things and certificates to enable them to do certain things for example Sainsbury’s would need some legal documents to prove that they can sell shares to customers and people who are interested in buying shares from anywhere across the world. A memorandum of association and articles of association would and other legal documents would be needed by Sainsbury’s and will have to be approved by registrar of companies.
If approved the registrar company will issue a certificate of incorporation as evidence that Sainsbury’s are registered company and there will be no problems and this will go on to prove Sainsbury’s continuity of existence as long as they have these certified certificates. Sainsbury’s will then go on to issue a prospectus which is an advertisement or an invitation to the public to buy shares from them. As Sainsbury’s will be issuing there shares to the public the registrar of companies will then issue a certificate of trading to Sainsbury’s.
After this the business will begin to start and the share prices will be quoted in the stock market. Sainsbury’s will need to file reports and accounts of all the expenses and all the money coming into the business so that they can see how well or how bad they are doing. They will also be able to set budgets for certain departments. For example Sainsbury’s would give each department a fixed amount of money that they can spend and if they go over the limit on what they need to buy then they will have to use there own personal money in order purchase the things they need.
Sainsbury’s will also have to keep track of profits if any and also keep track of loses that may happen. Sainsbury’s will need to find out how much it will cost to make a certain product which would be there variable cost and then they would be able to sell them for how ever much they would want to in order to find how much products Sainsbury’s would need to make a profit. Also managers would be able to keep check on their cash flow and firms can plan ahead such pre arrange over drafts or delayed payments.
Some of the uses of financial accounts of Sainsbury’s are that internal and external people may want to see them for example for external businesses such as banks, government, public, competition and suppliers may want to see these records to see how well Sainsbury’s are doing and if they are good to borrow money and see if they have enough assets to pay these people back or for a number of other reasons such as there own personal use. The internal users inside of this organisation that may want to see these accounts are managers, owners (shareholders), different departments, employees, and accountants.